The FUTURE OF WORK series
Global Mobility Report
Moving target
The new age of international assignments
and the rise of the accidental expat
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Global Mobility 2014
Moving target
Radical rethink................................................................4
The new mobile workforce.............................................6
Border control................................................................8
Recommendations........................................................10
The way forward...........................................................14
Millennials on the move...............................................15
Modern mobile workers and associated risks.............16
5 mobility myths...........................................................18
Visa checklist................................................................20
About the Future of Work Series..................................21
Global Mobility 2014
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Radical rethink
Before the global economic crisis, large multinationals routinely sent employees
to work abroad for years at a time to acquire new skills and gain international
experience. These assignments typically involved relocating the employee and his
or her family with generous expatriate packages that included housing allowances,
cost of living differentials, cultural training and foreign language classes.
But when the global economy went into free fall, multinationals pulled back. Like
the music shutting off during a game of musical chairs, the movement just stopped.
“When the economy tanked, we saw companies send no one for a period of time
because it was viewed as an add-on expense they didn’t need to incur,” says Betsy
Morgan, a global immigration and mobility partner based in Baker & McKenzie’s
Chicago office.
Since then, local economies have stabilized and business executives have returned to
the airports — but with some notable differences. Multinational companies have been
shortening international assignments from years to a matter of weeks or months and
using technology to create less expensive work arrangements such as cross-border
telecommuters and virtual teams. Employees are now more likely to be sent on
shorter, more project-based assignments to fill specific business or customer needs
than relocated overseas for the international experience.
At the same time, explosive growth in emerging markets has created a significant
demand for companies to move employees around the globe to explore and seize
new opportunities. As multinationals enter newly emerging markets to capitalize
on growing consumer populations and offshore their manufacturing and customer
service centers to lower cost locations, they need the ability to send employees
abroad to scout new locations, set up operations, provide specialized skills and fill
critical talent shortages. And they need to do it quickly.
“Companies are expecting their workforce to be more mobile than ever, but
not mobile in the traditional sense because the assignments don’t always
involve relocation,” says Kerry Weinger, a global employment partner based in
Baker & McKenzie’s Chicago office. “We’re not consigning the existing models
for international assignments to the history books yet, but the changes underway
surely call for a radical rethink.”
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Global Mobility 2014
For many multinationals, it’s not just a matter of moving individual employees into
new markets, but mobilizing large groups of workers, often from multiple countries,
to an overseas worksite. With flat to moderate growth in their domestic markets,
multinationals are finding the real growth opportunities in emerging markets, where
the rule of law is still developing. To meet the demands of these new markets, they
must recruit local and foreign workers to develop their products, provide services and
complete special projects, creating new compliance risks and immigration, tax and
employment law challenges.
A UK construction company, for example, may be vying for a contract to build a new
power plant in Saudi Arabia. To win the business, it will have to find teams of experts,
both internally and externally, to deliver on the contract. That could mean recruiting
workers from six or seven different countries and getting them to Saudi Arabia as
quickly as possible, knowing that if the company performs well on this project, it
could gain a foothold in the Middle East and win more work throughout the region.
This transformation of the global workforce has turned mobility from an administrative
HR function into a front-burner, high-risk issue for multinational companies. With
a large percentage of their revenues now coming from overseas, companies have
been forced to confront new regulations and stricter enforcement of how they move,
manage and classify their workers.
Why workers are sent abroad
What are the main objectives of international assignments at your organization?
To address an immediate
business need
95.7%
To provide employees to
complete short-term projects
67.4%
To support organizational
transformation or restructure
63.0%
To develop future senior leaders
(entry to mid- to senior-level talent)
63.0%
To develop future senior leaders
(entry to mid-level talent)
52.2%
To provide country and business
unit leaders
45.7%
To facilitate employee requests
23.9%
0%
20%
40%
60%
80%
100%
Source: RES Forum Annual Report 2014: Key Trends in Global Mobility
Global Mobility 2014
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The new mobile
workforce
The evolution of country-based multinationals into truly global entities has created
a fundamental shift in how and where business is conducted. A sharp growth in
international mobility is a clear consequence of this, as organizations work hard to
make sure they have the people with the right skills in the right place at the right time.
In an increasingly interconnected world, companies are questioning whether they
need to relocate individual employees to provide those skills, particularly when
relocation is so expensive. It can cost a company three or more times an employee’s
base salary per year he or she spends abroad because of the additional taxes,
housing, cost of living and other expenses. Why not just send them to a particular
location as needed?
This shift in thinking has led to the rise of a new breed of worker: the accidental
expat. Also called the extended business traveler and short-term assignee,
accidental expats engage in many of the same activities as the traditional expatriate,
such as providing management direction and specialized skills in the destination
country. The difference is they do so from their home country, traveling frequently to
the destination country to perform their duties without family members and the bells
and whistles of an expatriate compensation and benefits package.
Alongside the accidental expat, there’s been a noticeable rise in the number of crossborder commuters, virtual teams and global nomads. Aided by technology, these
workers use tools like email and video conferencing to connect with teammates
around the world and conduct their work from anywhere. Each of these new breeds
of worker creates unique tax, immigration, work environment and employment law
challenges for their employers. But it’s the accidental expats who represent the
highest compliance exposure.
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Global Mobility 2014
Accidental expats pose a particular risk for their employers because they move in
and out of other countries frequently, often traveling as tourists or business visitors
to avoid the expense and bureaucratic processes of getting work authorization,
despite the fact that the nature of their activities often require higher level visas.
Thus, they are more likely to get denied entry or detained at customs, creating
emergencies for human resources and general counsel.
Despite their growing numbers, accidental expats are often not subjected to the
same level of organizational oversight as their traditional expatriate counterparts.
Because these are not long-term relocations, they typically fall outside of a
company’s formal global mobility program. They often book their own travel or have
their assistants make their reservations. Given that multinationals have thousands of
employees working on hundreds of projects, human resources and general counsel
often don’t know where in the world they are — until there is a problem.
The short-term nature of these accidental expats also has the potential to turn
into longer term assignments, as local management may ask them to stay on for
another month or two, inadvertently creating foreign income tax and social security
withholding requirements. Depending on the nature of their activities and how long
they stay, their overseas assignment could also create a corporate taxable presence
for their employer and data privacy issues, as they often carry laptops, mobile phones
and other devices with sensitive company information back and forth across borders.
Additional
employer duties
As if violations of tax, immigration,
privacy, customs and employment
laws were not enough to worry
about, companies also have
a duty under most countries’
laws to protect the health and
welfare of their employees and
to provide them with a safe work
environment wherever they
are working. Failing to fulfill
this obligation can give rise to
civil and criminal liability for
employers, and in some cases,
for their directors and managers.
Kerry Weinger, Baker & McKenzie
Global Employment Partner
It’s not just a matter of individual employees getting turned away at customs or
penalized for tax violations, which is happening with much greater frequency. Even
more concerning is that governments are increasingly going after companies for
exhibiting a pattern of violating certain laws, such as sending large numbers of
workers into their country without proper visas. Companies that are prosecuted
for these types of violations face civil and even criminal action, penalties that can
undermine their revenues and damage their reputation.
Frequent business traveler activity
Frequent business traveler policies
A large majority of companies have experienced an upward
trend in frequent business travelers when compared to
short-term and long-term assignments.
Although frequent business traveler activity has significantly
increased, many companies do not have formal guidelines for
managing frequent business travelers.
Is your company seeing a change in frequent business
travelers vs. short-term and long-term assignments?
Does your company have a policy in place to ensure
compliance among your frequent business travelers?
Don’t
Know
15%
STA/LTA
Increase
21%
No
Change
6%
Business
travelers
Increase
58%
Yes
41%
No
59%
Source: Ernst & Young Frequent Business Traveler Survey Report 2012
Global Mobility 2014
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Border control
More than 200 million people (roughly the entire population of Brazil) are now
working outside their home locations. That increase, along with critical talent
shortages in specific markets and disciplines, has pushed mobility to the top of
many corporate agendas. It has also turned immigration reform into a major
political issue in countries from Canada and the US to the UK and Australia.
In the US, there’s been a noticeable outcry from the US business community
claiming that the country’s immigration system is hurting innovation and
economic progress. US business leaders have been urging lawmakers to make
the country’s immigration policy more employer friendly. It’s an issue that has
united competitors and become a critical item on the corporate agenda.
The reason for the outcry is simple: The rising demand to import talent has vastly
outpaced government quotas. In the US, for example, the government issues
65,000 H-1B visas a year for highly skilled workers. Those visas get snapped
up within days, even hours of being offered, creating huge backlogs and talent
shortages. About 25 percent of H-1B visas go to Indian nationals filling a growing
demand for specialized skills in fields like engineering and computer science.
A major concern when reforming immigration policy is retaliation from other
countries. If, for example, the US put more limits on H-1B visas, the Indian
government is likely to place greater restrictions on US workers coming into
its country. In today’s interconnected world, balancing the need to protect the
local workforce with filling domestic talent gaps and safeguarding overseas
opportunities for their citizens and corporations has become increasingly tricky
for governments.
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Global Mobility 2014
“Most of the changes to the US immigration system since 2006 have not been very
helpful for the employer community,” said Lisa Atkins, director of immigration policy
at the US Chamber of Commerce, during a panel discussion at Baker & McKenzie’s
Global Employer Forum. “Anyone who has dealt with the movement of temporary
employees, green cards or STEM graduates knows that our immigration system is
difficult to navigate. We’re really doing ourselves a disservice.”
Most of the changes to the
US immigration system
since 2006 have not been
very helpful for the employer
community.
Another effect of immigration policies not keeping pace with demand is
noncompliance. To circumvent strict limits on visas and avoid lengthy bureaucratic
processes, companies are more likely to send employees into other countries without
the proper work authorization. In one such case, the US government recently reached
a multi-million dollar settlement with a multinational IT outsourcing company for
allegations that it was using more easily obtained business visitor (B-1) visas rather
than the more expensive, limited H-1B visas, to place its workers on long-term
projects with US companies.
Lisa Atkins
Director of Immigration Policy
US Chamber of Commerce
As the workforce in developed countries continues to age and the nature of work
shifts toward highly skilled labor, many governments are recognizing the need to
lower their immigration barriers to allow businesses to import much-needed talent.
But change is slow, and in many cases going in the opposite direction. Since the
global economic crisis, many governments have cracked down on visa misuse and
tightened their borders to protect their local workforces. As a result, the acceleration
of global mobility is happening in spite of governments in many regions, rather than
aided by more open policies.
Educating business travelers
Are your frequent business travelers briefed on the potential tax and immigration
issues related to their international travels?
48%
No
Yes
Other
37%
15%
Source: Ernst & Young Frequent Business Traveler Survey Report 2012
Global Mobility 2014
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Recommendations
All of these changes in the nature of business, the global economy, border
control and international assignments amount to a major issue for employers:
new compliance risk. Those risks include immigration and visa requirements,
tax and social security implications, data privacy mandates, employment laws,
equity awards and compensation issues, and anti-corruption restrictions.
To account for these risks and keep pace with an increasingly mobile workforce,
companies must rethink their talent and mobility strategies and adjust
their policies and procedures accordingly. Politics and political unrest are
constantly shifting the barriers to mobility and any global mobility strategy
needs to be nimble enough to react quickly to those changes. Here are some
recommendations to help you better manage this process.
Educate employees and business managers on your business
travel policies.
In today’s fast-faced business environment, it’s nearly impossible to know
where all of your employees are at any given time and to monitor their
activities. That’s why it is so important to establish a company travel policy and
incorporate it into your employee handbook. Based on that policy, you should
develop an education program for business travelers and their managers to
inform them of the types of business trips your company will authorize and
to instruct employees on relevant immigration, labor and tax laws of different
jurisdictions so they don’t inadvertently violate them. Wherever possible,
managers who frequently send their employees abroad should be trained on
the types of activities that require work authorization and the consequences
of non-compliance. To raise sensitivity to these issues, some companies have
developed training videos that depict various business travel crises and how
they could have been avoided.
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Global Mobility 2014
Require employees to fill out an online compliance checklist
before booking their travel.
Most multinationals have formal global mobility programs for managing the
relocation of employees for long-term assignments. But in many organizations,
short-term business travel is arranged by the employees themselves without
oversight from human resources or anyone familiar with the potential legal and tax
issues. Recognizing the increasing compliance risks this creates, some companies
have moved toward creating standard procedures for their business travelers to
detect and address immigration, tax and other compliance issues before they leave
the country.
One way to identify immigration red flags is to have employees fill out an online
questionnaire that assesses these issues as part of obtaining travel authorization.
Before booking their tickets, employees must answer questions like: What is the
purpose of your trip? Do you have the proper visa? Have you ever been stopped at
customs? Have you or anyone on your team ever been detained? Do you have direct
reports in the country you’re visiting? How many days have you spent in this country
over the last year?
Managers who
frequently send their
employees abroad
should be trained on
the types of activities
that require work
authorization and
the consequences of
non-compliance.
Based on their answers, the program should tell them whether a business traveler
visa is sufficient or alert HR or the legal department that further investigation is
needed to determine the proper level of work authorization. If your company uses
a dedicated travel agency for booking business travel, you can task the agency with
having employees fill out the checklist and monitor the responses for escalation
within your organization.
Having systems like this can not only help track employees and prevent compliance
problems, but show enforcement authorities that you have a formal process for
conducting immigration due diligence, which can work to your company’s benefit if
you come under investigation. The key is demonstrating that your company is actively
managing its business travelers and has systems in place to help employees comply
with immigration, tax, and labor laws so that single incidents don’t blow up into
larger enforcement issues.
Establish a policy that all extended or frequent business travel
must be reviewed by HR or general counsel.
As the line between international assignments and business travel has become
increasingly blurred, it raises the question of whether it still makes sense to
separate the management of global mobility and business travel. Although the need
for work authorization is usually based on the nature of the activity rather than the
length of time in the country, the longer an employee is spending at an overseas
worksite suggests that they are doing more than attending meetings or conferences.
That’s why travel to one country for an extended period or frequent trips should be
evaluated by the HR department or general counsel’s office to determine whether
work authorization is required.
Some companies have also moved toward creating formal short-term assignment
and extended business travel programs that provide a level of oversight typically
lacking of business travelers. If, for example, a company is sending large groups of
workers in and out of Germany every few months to work on a big project, human
resources and legal counsel can analyze the types of activities the workers will be
engaged in, make sure they secure the proper visas and monitor whether they are
complying with host country tax laws.
Global Mobility 2014
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Another approach is to revise your global mobility program to incorporate the
more modern international assignments, such as having a multi-tiered system
with different packages and procedures for employees sent abroad for strategic
business reasons, employees sent overseas for developmental purposes, and
employees who would simply like to work abroad for the cultural experience,
such as the millennial generation.
Limit the activities of your business travelers.
One way to mitigate your business traveler risk is to educate employees on the
types of activities they can engage in as business travelers and if necessary, modify
their activities so they don’t do any substantive work that would trigger the need for
work authorization or create adverse tax consequences. For example, if you have a
US-based sales manager whose territory includes Quebec, even if Quebec accounts
for a small portion of his or her sales, that manager would still need authorization
to work there. To avoid this requirement, you could have the US sales manager work
with a Canadian manager who serves as the lead on customer relationships and
does all the sales work, while the US manager provides background knowledge on
the product and other support that doesn’t rise to the level of substantive work. With
advanced planning and proper training, it may only take slight modifications in an
employee’s activities to protect your company while conducting necessary business.
Frequent business traveler risks
Permanent
establishment
Regulatory
compliance
Employment
law
RISKS
Business
reputation
Prosecution
Unexpected
costs
Employee
difficulty leaving
host country
Source: Ernst & Young Frequent Business Traveler Report 2012
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Global Mobility 2014
Get weekly updates on the entry and work authorization rules in
the countries where you do business.
Keeping up with the changing rules and requirements to enter and work in the
countries where your company operates can be a real challenge. Since the global
economic crisis, governments around the world have become stricter about
enforcing their immigration laws, scrutinizing petitions and implementing new
rules for getting visas to protect the local workforce. Russia, for example, recently
passed a rule requiring those applying for a specialist visa to provide an education
certificate from their college or university that is translated into Russian, an
administrative task that can add a month to the visa application process. Because
these rules change quickly, it’s easy to be surprised by a denial of an application
in what is typically a routine filing for your company. That’s why you should receive
regular updates on local developments from sources such as outside counsel that
specializes in immigration law in particular regions, global mobility publications and
business newsletters that cover these issues.
Use immigration experts who routinely file for particular visas in
specific regions.
Immigration laws and the rules for applying for visas can vary widely from jurisdiction
to jurisdiction. To avoid unexpected delays and unpleasant surprises, it can be helpful
to work with outside counsel that routinely handles a high volume of transfers into
the countries where you operate. This type of experience is invaluable for knowing
the local laws, staying abreast of changes and understanding how to quickly and
efficiently navigate the process. Activities that may constitute a business visa in
China, for example, may not be the same in Saudi Arabia. By consulting experts who
know how to analyze the activities employees will be engaged in to determine the
appropriate type of visa, you will be able to move your workforce more quickly while
reducing your legal exposure.
Have a centralized system for initiating and tracking cases,
monitoring deadlines and providing companywide reporting.
In an ideal world, the human resources department, legal counsel and tax experts
would be consulted on the comings and goings of every business traveler. In reality,
that’s impossible. To gain better oversight of the movement of their workforce,
many multinational companies are using just one outside law firm to manage
all of their employee transfers rather than having four different vendors in four
different regions. By consolidating their representation, companies gain access to
one centralized system that provides a big picture view of their increasingly global
workforce. Through that centralized system, companies can establish standardized
procedures for leading employees through the visa application process, monitor the
status of various cases and keep closer tabs on the interrelated tax, benefits, data
privacy, labor law and corporate compliance issues.
Keeping up with the changing rules and requirements
to enter and work in the countries where your company
operates can be a real challenge.
Global Mobility 2014
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The way forward
Short-term assignments are nothing new and accidental expats have been around for
decades. What’s changed in recent years is their growing prevalence and the fact that
governments have become more motivated to crack down on business travelers and,
with the assistance of technology, increasingly adept at catching their transgressions.
Governments have also become stricter about monitoring and enforcing how
companies classify and move large groups of workers to overseas worksites for
longer term projects.
Practices that used to be commonplace are now facing much greater scrutiny,
making talent recruitment and extended business travel hot button issues for human
resource and tax professionals and corporate counsel at multinational companies.
With more global employees than ever, companies must find new ways to track their
movement and make sure their cross-border trips and activities are compliant with
a growing number of rules and regulations that span numerous legal and tax areas.
“It’s a lot cheaper to prevent a problem than to remedy it after it happens,” says
Global Employment Partner Kerry Weinger. “A lot of companies don’t want to address
the changes in global mobility because it costs money and distracts them from their
jobs. But it is the best practice.”
It’s not only cheaper to prevent problems early, but the best way to protect your
workforce, your business and your reputation in the new age of global business.
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Global Mobility 2014
Millennials on the move
Adapting to a changing business world isn’t the only reason multinational companies
are innovating their approach to global mobility. International assignments are now
recognized as a key element in attracting, retaining and developing talent. This is
particularly true of the millennial generation (those born between 1981 and 2000),
which will form the majority of the workforce by 2020.
In fact, 71 percent of millennial workers say they expect to have an overseas
assignment during the course of their careers, according to a recent PWC report.
They are more interested in flexible work arrangements and work-life balance,
place higher value on working for companies with strong corporate social
responsibility programs, and are more likely to seek out volunteer opportunities
that help them feel like they are making a difference. Millennials also seek faster
career progression and are more likely to leave a job if they are not feeling fulfilled
in their work environment. Unlike their predecessors, they expect to work for a
number of employers during their careers, making retention a major concern for
the companies that employ them.
We’re seeing a 250 percent
increase in companies
that are implementing
international volunteer
programs. It’s truly a best
practice.
Paula Caligiuri
Professor of International Business
Northeastern University
To appeal to these preferences, many companies have been revising their mobility
programs and implementing initiatives like international volunteer programs.
Through these programs, typically administered by the human resources department
as a leadership development tool, companies send their employees to other countries
for one month to a year to work on special projects within the local community. Dow
Corning, for example, has sent electrical apprentices from its Michigan headquarters
to India to help local companies improve their manufacturing processes.
“When that international volunteerism experience is well crafted so that millennials
can stretch their professional skills and provide long-term benefits to the project,
companies report getting an employee back with new ideas and a different
perspective on the emerging market where they were posted,” said Paula Caligiuri,
a professor of international business and strategy at Northeastern University,
during a global mobility panel discussion at Baker & McKenzie’s Global Employer
Forum. “We’re seeing a 250 percent increase in companies that are beginning these
programs. It’s truly a best practice.”
Global Mobility 2014
| 15
Modern mobile workers
and associated risks
MOBILE WORKER
16 |
POTENTIAL RISKS
Business traveler: An employee traveling to another
country for less than a month to attend meetings,
trainings or conferences.
If traveling with a tourist or business visitor visa,
a business traveler is not authorized to engage in
substantive work, such as managing subordinates and
performing system maintenance.
Extended business traveler: An employee sent to
another country for one to three months. This worker
remains an employee of his or her home employer,
remains on the home employer's payroll and receives
reimbursement for travel expenses. If traveling as a
business visitor, he or she can only attend meetings,
conferences and trainings or scout new business
ventures or office locations. If the extended business
traveler's activities morph into substantive work, he
or she will typically need a temporary work permit.
Also called frequent business travelers, stealth
expats and rogue travelers.
The extended business traveler poses significant
compliance risk for employers because he or she often
travels under the radar, using a tourist or business
visitor visa to enter a country to perform substantive
work that benefits the host company, which violates
local immigration law and can create a local corporate
taxable presence for the home country employer. The
worker's visits to a particular country may be subject to
local income tax withholdings and reporting, and social
security obligations, even if compensation costs are not
charged back to the host company.
Short-term assignee: Similar to an extended
business traveler but typically sent overseas for a
longer period of time, between three to 12 months,
with a richer compensation package and greater
oversight. The short-term assignee's employer may,
for example, cover travel expenses for his or her
spouse or partner to visit every three months.
If the short-term assignee’s visa does not match the
type of work he or she is doing in the host country or
the assignee and employer do not meet local tax and
registration requirements, this worker can create
significant compliance risk. Reimbursement of spouse
or partner costs can also increase the tax cost.
Cross-border commuter: An employee who generally
works Monday through Friday in one or more
countries and returns home to another country on the
weekends. It is a growing phenomenon as companies
expand throughout various regions and executives
become responsible for supervising teams and
operations in larger territories.
A major legal issue with this type of worker is
determining the appropriate income tax and social
security withholdings and reportings in the relevant
jurisdictions and avoiding double taxation. To avoid
immigration violations, the cross-border commuter will
also need work authorization in each destination country.
Cross-border telecommuter: An employee who
works remotely for a company based in another
country. This arrangement often arises when a
worker's spouse or partner has been assigned to
work overseas and the spouse follows the partner
to that country while continuing to work for his or
her home employer remotely.
Potential legal issues with this arrangement are the
possibility that the telecommuter’s employer could be
subject to corporate income taxes in the host country
based on the worker’s activities there and that his or her
home office or work practices could violate local labor
laws such as health and safety requirements and wage
and hour laws. The telecommuter will also be subject to
income taxes and social security withholdings in the host
country. Because the telecommuter will not physically
enter the country, there would be no immigration issue.
Global Mobility 2014
MOBILE WORKER
POTENTIAL RISKS
Global nomad: An employee who moves from
assignment to assignment with no real home base or
intention to return to a home country. With the rise of
emerging markets, there has been an uptick in this
type of worker because of the demand for those with
the leadership and specialized skills required for
setting up operations in new markets.
The global nomad, whose responsibilities often straddle
several countries, may experience substantial exposure,
depending on his or her activities in the destination
countries. Careful planning to limit exposure is advised.
The legal challenge with a global nomad is providing him
or her with an appropriate compensation and benefits
package because this worker doesn’t often stay in one
country long enough to accrue benefits such as social
security. Companies may need to develop separate
health insurance, compensation and retirement plans
for this unique group, as well as evaluate their activities
for work permit purposes.
Business expatriate: An employee relocated to a
host country with plans to repatriate the employee to
his or her home country after two to five years. This
worker is the traditional expatriate, typically a senior
or high potential executive sent overseas to develop
leadership skills and global competencies to be
groomed for larger roles. This worker receives an
expatriate package that often includes a housing
allowance, relocation fees, cost of living differentials,
home leave trips, tax reimbursement, cultural
training and language classes.
To avoid immigration exposure, business expatriates
need work authorization in the host country. But
because of the expense of expatriate packages,
companies have been cutting back on these types of
long-term assignments in recent years. A traditional
business expatriate also poses a retention risk to his or
her employer because more than half of these workers
leave the company within two years of returning from
an international assignment.
Indefinite transferee: An expatriate who is shifted
to the local salary structure and benefits plan after
being in the host country for five or more years. This
worker can also be localized from the start of their
transfer date, such as those who request transfers
for personal reasons.
Long-term assignees will need work authorization and
possibly long-term permanent, immigration residence
planning from the outset of the assignment. Because
of the substantial expense of maintaining employees
on long-term overseas packages, more companies are
phasing out or taking away expatriate benefits after the
employee has been abroad for a number of years.
Companies are expecting their workforce to be
more mobile than ever, but not mobile in the
traditional sense because the assignments don’t
always involve relocation.
Kerry Weinger, Baker & McKenzie Global Employment Partner
Global Mobility 2014
| 17
5 mobility myths
There’s no question that it can be a time consuming, labor intensive process to
obtain proper work authorization for employees conducting business in other
countries. But the problem with not paying enough attention to immigration and
tax requirements is that government officials around the world are tightening
their borders and cracking down on visa misuse and tax violations. Here are
some of the most common mobility misconceptions that can get employees
and their employers in trouble in today’s environment of heightened scrutiny
and enforcement.
1
It’s the length of time an employee will be in another country that determines
what kind of visa he or she needs.
This is a common misconception. It’s actually the types of activities an employee will
be performing rather than the length of time he or she will spend in another country
that determines the need for work authorization. If employees are traveling across
borders to attend meetings, trainings or conferences, they are typically fine using
a tourist or business visitor visa. The same is true of employees visiting another
country to scout new business ventures or office locations, such as meeting with
potential customers or real estate brokers. But the moment that work becomes
substantive, such as managing subordinates and performing systems maintenance,
local law will most likely require that they have a work permit. It doesn’t matter if
that employee will be in the country for one hour or one month. If they are doing
substantive work that benefits the local office, they will need work authorization.
2
Entering the country as a tourist or business visitor worked last time, so it
will work this time.
Not necessarily. Since the global economic crisis, immigration authorities have
become increasingly aggressive in scrutinizing whether foreign business travelers
have proper work authorization. This is largely because higher unemployment
rates during the economic downturn has caused many countries to become
more protective of their local workforces. As a result, practices that used to be
commonplace are now facing greater scrutiny. Customs officials are more likely
to stop travelers and question them about how long they plan to be in the country
and what they plan to do there. Those with passport stamps that show they have
been coming and going frequently could face extensive questioning about the
nature of their activities. If those activities involve substantive work without proper
authorization, the employee could be detained or denied entry into the country.
Their company could also face fines and even criminal action.
3
The worst thing that can happen if our employees get caught traveling
without proper visas is being denied entry to the country.
Not anymore. It’s distressful and disruptive enough for employees to get stopped
at customs, detained and denied entry to a country where a major project or local
team awaits them. But the stakes have grown much higher. Governments are
imposing large fines and even criminal penalties on companies that send workers
into countries without proper work authorization. In one of the most notable
examples to date, the US Department of Justice reached a multi-million dollar
settlement with a multinational IT outsourcing company for allegations that it was
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using business visitor (B-1) visas to place its staff on long-term projects with US
companies. The settlement, announced in October 2013, is the largest visa fine ever
imposed by the US government. It’s also reflective of a growing trend of government
agencies around the world cracking down on business travelers who engage in
substantive work.
4
It’s easier and less expensive to send employees on a series of short
business trips than to relocate them during a project.
Not really. This strategy could create greater travel expense and doesn’t avoid
the need to obtain employment authorization for the employee in the destination
country. Once a company does the math, it will sometimes find it’s actually cheaper
to send an employee to a destination country for three or four months at a time
with the visa that allows for employment than to have him or her traveling back
and forth on shorter trips. You not only eliminate the additional air fare, but hotel
stays and other pricier temporary housing arrangements that quickly add up. The
misconception that as long as business travelers keep their visits brief, they can
enter other countries as tourists or business visitors has led many companies to
take this short cut. But with the heightened scrutiny of these practices, spending
the extra time and money to get the right visa at the outset can prevent future
immigration headaches. It can also potentially shorten the length of the project
and enable the employee to focus on the task at hand without the interruption of
traveling in and out of the country.
5
If employees limit their overseas stay to less than six months, they won’t be
subject to local income taxes or social security contributions.
Sort of, but it can be tricky. Whether a foreign employee has to pay local income
taxes or make social security contributions depends on the host country’s domestic
tax laws and social security rules, as well as what kind of tax treaty or social
security agreement his or her home country has with the destination country. The
US, for example, has income tax treaties with more than 70 countries. Under most
of these tax treaties, the general rule is that as long as employees are tax residents
of the home country and employed and paid by the home country employer, they
do not have to pay local income tax if their cumulative stay is less than six months
(184 days). The tricky part is that in some tax treaties, that six-month period is
within a calendar or fiscal year while in others, it spans specific dates. In newer
treaties, the trend is to start the clock when the employee first enters the
destination country and count the 12 months from that date. If an
employee is making frequent business trips to a destination
country, it’s important to keep track of the time they spend
there, as those days can quickly add up to more than
six months. Another issue that can trigger foreign tax
liability is if the home country employer charges the
employee’s compensation back to the destination
country company. In that case, the employee
will generally be subject to local income tax no
matter how long he or she is there.
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Visa Checklist
How to better track your business travelers
Some companies have designed online forms that employees must fill out before
they book their travel to determine whether the activities they will be performing
require work authorization. Employees are asked to explain the purpose of their
trip and based on their answers, receive direction on whether they can travel with
a business visa or need to obtain a work permit. Although these distinctions can
vary by jurisdiction, here are some examples of the types of activities that fall into
the two categories.
Visa Type
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Global Mobility 2014
Visa Activity Description
Business
Attend meetings with colleagues, customers, vendors, etc.
Business
Collect information for bid/proposal efforts
Business
Negotiate contracts (in some situations)
Business
Visit an overseas office to review progress on a project
Work permit
Deliver training
Work permit
Site supervision
Work permit
Site surveys
Work permit
System maintenance
Work permit
Troubleshooting
Work permit
Warranty work
Work permit
Installation
Work permit
Fill in for someone's absence
The Future of Work Series
The Future of Work is a series of client reports based on panel discussions at our
Global Employer Forum, a two-day thought leadership conference we first hosted
in September 2013. During the forum, nearly 70 clients, academics and consultants
gather with our employment partners to discuss pressing workplace topics like talent
shortages, data privacy, global mobility assignments, globalization of unions and
managing the employment aspects of M&A deals.
Rather than the traditional “how to” legal format of most law firm conferences, the
Global Employer Forum features panel discussions of in-house counsel and seniorlevel executives from some of the world’s largest multinational organizations who
discuss their personal experiences addressing these challenges and the solutions
they have found to overcome them.
Based on the hottest topics arising out of those panel discussions, we create these
reports to share the current trends on these issues, insights from members of major
multinational organizations, academia and government agencies on how they are
navigating these trends, and the legal expertise of our lawyers who are on the front
lines advising clients on the shifting employment landscape. We hope you find these
reports helpful in meeting the new challenges of managing a modern workforce.
Global Mobility 2014
| 21
www.bakermckenzie.com
About Baker & McKenzie’s Employment Law Practice
Our Global Employment Practice includes more than 500 locally qualified
practitioners in 47 countries. We have more lawyers with mastery of the
subtle intricacies of labor, employment, immigration and benefits issues
in more jurisdictions around the world than any other leading law firm.
Chambers Global 2014 ranks both our Global Employment and Global
Immigration practices as Tier 1. Baker & McKenzie is recognized by PLC
Which lawyer? Labour and Employee Benefits Super League 2012, as the
top global law firm with our Global Employment practice ranked in 25
countries, and we are among the 10 firms US general counsel list most
often as “go-to” advisors on employment matters.
If you have any questions about this report or would like to know
more about the Global Employment Practice, contact:
Patrick O’Brien
+1 312 861 8942
Patrick.O’Brien@bakermckenzie.com
© 2014 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with
member law firms around the world. In accordance with the common terminology used in professional
services organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a
law firm. Similarly, reference to an “office” means an office of any such law firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not
guarantee a similar outcome.
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